Fair Play

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Copyright © 1997 by Steven Landsburg

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Library of Congress Cataloging-in-Publication Data

Landsburg, Steven E.

Fair play: what your child can teach you about economics, values, and the meaning of life/by Steven E. Landsburg.

   p. cm.

Includes bibliographical references.

1. Economics—Moral and ethical aspects. 2. Economics—Study and teaching (Elementary)—Case studies. 3. Concepts in children—Case studies. 4. United States—Economic conditions—1993—I. Title. HB72.L36 1997 330—dc21

97-35813

CIP

ISBN 0-684-82755-7

ISBN-13: 978-1-4516-1239-4

eISBN-13: 978-1-4516-1240-0

Page 44 includes several lines from In Country Sleep by Dylan Thomas, from The Poems of Dylan Thomas. Copyright © 1967 by The Trustees for the Copyrights of Dylan Thomas. Reprinted by permission of New Directions Publishing Corp.

CONTENTS

Acknowledgments

Chapter 1: THE ECONOMIST AS PARENT AND THE PARENT AS ECONOMIST

Chapter 2: THE LESSONS OF THE PLAYGROUND

Chapter 3: WHAT CAYLEY KNOWS

Chapter 4: AUTHORITY

Chapter 5: WHAT LIFE HAS TO OFFER

Chapter 6: CULTURAL BIASES

Chapter 7: FAIRNESS I: THE GRANDFATHER FALLACY

Chapter 8: FAIRNESS II: THE SYMMETRY PRINCIPLE

Chapter 9: THE PERFECT TAX

Chapter 10: THE PERFECT TAX, DECONSTRUCTED

Chapter 11: RESPONSIBILITY: WHO YA GONNA BLAME?

Chapter 12: BEQUESTS

Chapter 13: PEOPLE WANTED

Chapter 14: THE THIRD R

Chapter 15: THE ARITHMETIC OF GOVERNMENT DEBT

Chapter 16: THE ARITHMETIC OF DISCRIMINATION

Chapter 17: THE ARITHMETIC OF CONSERVATION

Chapter 18: WHAT MY DAUGHTER TAUGHT ME ABOUT MONEY

Chapter 19: WHAT MY DAUGHTER TAUGHT ME ABOUT TRADE

Chapter 20: ADVICE TO AN ECONOMIST’S DAUGHTER

APPENDIX: FURTHER READING

INDEX

Acknowledgments

The ideas in this book were forged, refined, and polished by fire. The fire was ignited by my colleagues in the Lunch Group, who strive daily, over sandwiches and coffee, to illuminate every aspect of the human condition. Almost always there are sparks. Often there is a flash of insight. Occasionally there is a conflagration.

Our ambition is to understand the world, both as it is and as it ought to be. Each day, one or more of us offers an idea for the group’s consideration. Each offering is subjected to criticism so intense and so precisely focused that the idea must either be reduced to ashes or purified and hardened.

Every idea in this book has been tested in the crucible of the lunchtable, and—in my possibly controversial opinion—survived. A dozen times as many were consumed by the flames. Let me explain why that process matters.

Economists believe a lot of things that strike ordinary thoughtful people as self-evidently false. (More disturbingly, economists know to be false a lot of things that strike ordinary thoughtful people as self-evidently true.) It is therefore important to emphasize that we don’t just make this stuff up as we go along. Economics is a serious discipline, with reasonably precise standards of logic and evidence. In much of my earlier writing, I’ve tried to explain what those standards are, and to demonstrate how we apply them to reach conclusions that are sometimes startling.

In my earlier book, The Armchair Economist, and in my magazine columns, I have argued that increased promiscuity can retard the spread of AIDS, that charitable people would never give to more than one large charity, and that monopoly theatre owners would not charge high prices for popcorn except under rather special circumstances. Those conclusions might appear implausible, but they all meet the ultimate test of good economic reasoning: Every one of them can be translated into pure mathematics, whereupon it can be verified that the conclusions follow inevitably from the (clearly stated) assumptions. No discourse about economics should be taken seriously unless it meets that test.

This book contains a lot of discourse about economics, and by the standard I’ve just established, all of it deserves to be taken seriously. I am sure of that because I’ve performed the mathematical translations myself, as I do whenever I write about economic issues. I am therefore certain that those parts of the book which concern themselves with pure economics are correct, even when they are contrary to what I might have guessed before I calculated.

But this book also contains a lot of discourse about things that are not strictly economics—things of more fundamental importance, like fairness, and justice, and tolerance, and responsibility. That discourse is not entirely susceptible to mathematical verification. Thus my faith in its correctness—and I have considerable faith—must be based on some other powerful discipline. Without that basis, my thoughts on fairness and justice would be no more appropriate for presentation to a general audience than a list of my favorite movies.

The discipline I have come to rely on is the discipline of the lunchtable, where successful ideas must be internally consistent, compatible (in logic and in spirit) with established principles, and applicable in a multitude of hypothetical scenarios—and where every possible failure to meet those criteria is honestly acknowledged and explored. That discipline is less precise than pure mathematics, and I am accordingly less certain of my conclusions about fairness than of my conclusions about economics. But as far as I am aware, it is the best discipline available.

I did not invent all the ideas in this book. But even if I had, I wouldn’t have written about them without first subjecting them to the level of scrutiny that—in my experience—only the Lunch Group can provide. Among those who have been particularly helpful are John Boyd, James Kahn, and Alan Stockman, all of whom have provided me with extensive comments both during and after lunch. I am immensely grateful to them. I am grateful too for the helpful comments of Lauren Feinstone, who has stopped coming to lunch but is with us in spirit.

One of the many great things about the Lunch Group is that no dominant figure has ever emerged—the depth of thought and intellectual ardor are uniformly high, and few conclusions are reached without significant contributions from every member. But for the particular issues that are addressed in this book, I owe an exceptionally large debt to Mark Bils. Mark brings to the table an unshakable conviction that fairness is fundamentally important; an insistence that intellectual inquiry can reveal important truths about how we should behave; an eye for the surprising, apt and fruitful analogy that was invisible until Mark revealed it and impossible to ignore thereafter; and an instinct for the kind of irony that demands reconsideration of everything you thought you knew. Through his insistence that fairness could not mean one thing on the playground and another in the marketplace, Mark was the direct inspiration for this book.

Parts of this book have been expanded from my columns in Forbes and Slate. Those that appeared in Slate have benefited from intelligent and sensitive editing, for which I humbly thank Michael Kinsley and Jack Shafer. I am grateful also for the patience, encouragement, and good sense of Bruce Nichols, my editor at the Free Press.

My final acknowledgment is to the staff of Barnes and Noble in Pittsford, New York, where I spend several hours a day working on my laptop computer. They’ve made me feel warmly welcome, and I hope I can repay them by helping them sell a lot of books.

1

The Economist as Parent and the Parent as Economist

HUNGER AND FATIGUE MAKE ME CRANKY. Food and sleep cheer me up. Somehow I reached adulthood without fully recognizing these truths. I knew them in the way that I knew Aaron Burr was the third Vice President of the United States, but I didn’t know them in the way that I know not to step in front of oncoming traffic. They weren’t built into my instincts.

With parenthood came wisdom. You can’t live with a toddler and fail to discover the palliative benefits of a meal or a nap. Observing those responses in my child, I discovered them in myself. It’s helped me to take better care of both of us.

My daughter Cayley, now aged nine and the apple of her father’s eye, strove from infancy to focus my attention on certain principles of applied economics, beginning with the importance of material comforts. Cayley and I have been teaching economics to each other ever since.

I also teach economics in another guise, as a professor at a university. Professors and parents have a lot in common. A good professor, like a good parent, is there to teach, to learn, and, in the best of circumstances, to rejoice as his students surpass him.

If you’re a parent, then you’re an economics teacher. Economics is about facing difficult choices: earning income versus enjoying leisure, splurging today versus saving for tomorrow; developing new skills versus exploiting the skills you’ve got; searching for the perfect job (or the perfect marriage partner) versus settling for the one that’s available. I want my students to think hard about those choices; I want my daughter to think hard about them too.

One of the great lessons of economics is that there is no single best way to resolve such choices; everything depends on circumstances; what’s right for you can be wrong for your neighbor. Economics is the science of tolerance. Good economics professors teach their students that people can live very differently than you do without being either foolish or evil. Good parents teach their children the same thing.

Economics breeds not just tolerance but compassion. The economist’s method is to observe behavior closely, the better to understand other people’s goals and other people’s difficulties. That kind of understanding is the basis of all compassion.

I teach a freshman honors seminar in economics. On the first day of class, I ask my students to tell me why today’s grocery shoppers demand larger carts than their parents did thirty years ago. Here are some of the better answers: Today’s working women can’t shop every week the way their mothers did; they (or their husbands) must stock up more on each infrequent trip. Or: Today’s working women can’t cook dinner for the entire family as their mothers did; instead they buy enough food so that mom, dad, and the kids can all fend for themselves. Or: Today’s wealthier families serve a greater variety of dishes at each meal. Or: Today’s wealthier shoppers are willing to pay higher grocery prices for luxuries like wide aisles and the carts those aisles can accommodate. Or: Today’s larger houses provide more storage space in the pantry. Or: Today’s ubiquitous ATM machines mean that shoppers are no longer constrained by their unwillingness to carry lots of cash.

If things go well, students challenge each others’ answers in insightful ways. One student says that today’s shoppers buy more because advertising techniques have become more effective. Another objects that with a given income, shoppers who buy more of one product must necessarily buy less of another.

The point of the exercise is not to understand shopping carts; it’s to understand the technique of understanding. To succeed at this game, students must be sensitive to the problems of families very unlike their own. Learning to see the world through someone else’s eyes is an essential part of economic training; it’s also an essential part of growing up.

There are a lot of good questions to practice on. Next year I think I’ll ask my students why two-earner families generally save less than one-earner families with identical incomes. Is it because the two-earner family hires a housekeeper? Is it because working mothers care less about their children’s future than stay-at-home mothers do? Is it because working mothers provide such good role models that their children can make it on their own without a large inheritance?

Or else I’ll ask why, in every culture, men are far more likely than women to commit suicide. Is it because women feel a greater obligation to continue caring for their offspring? Or is it because women live longer, and can therefore look forward to surviving the spouse who is making life unbearable?

Teaching this stuff is a lot like parenting, really. When my daughter comes home in distress because she thinks she’s been slighted in the schoolyard, I can help by encouraging her to imagine events through the other kids’ eyes. There’s a technique to that kind of imagination. You make a guess; you ask if it seems plausible; you check whether it’s consistent with all the evidence; you refine your guess. That’s exactly how a good economics student thinks about shopping carts.

Economics is about more than just individual choices. It’s also about social choices: rewarding initiative versus promoting equality; preserving freedom versus preserving order; providing opportunities for the masses versus providing a safety net for the least fortunate. In other words, we want to ask: What is right? What is just? What is fair? My daughter is keenly interested in the same questions, more concretely posed: Is her allowance an entitlement or a reward for a clean room? Should she be free to ignore her parents’ advice and wear a summer jacket on a winter day? Should she and her friends choose a video that most of them love or a video that none of them hates? Every time a child cries That’s not fair!, a parent is forced to confront some issue of economic justice.

I am bilingual. In the classroom, I speak the language of graphs and equations; in the living room I speak the language of dreams and imagination and the drying of tears. In the classroom I talk abstractly about the advantages of writing an enforceable contract; in the living room I talk concretely about why Cayley’s friend Jessica doesn’t like her to change the rules of checkers in the middle of a game. In the classroom I talk about the general problem of delineating property rights; in the living room I talk about the specific moral issues raised when one child lays claim to a quarter of the communal sandbox. Being bilingual doesn’t mean you have twice as much to talk about; it means only that you get to talk about the same things twice.

But here’s something odd: Sometimes issues that seem murky and difficult in the language of the classroom become clear and simple in the language of the living room, and sometimes the reverse is true. This suggests that parents and economists have a lot to teach each other.

That’s what this book is about. It’s a patchwork of essays about issues—basic human issues like fairness and justice and responsibility—that both parents and economists are forced to confront. It’s about principles of right and wrong which are obvious to every parent, but must be taught to wayward children and wayward economists. It’s about techniques of understanding. It’s about teaching economics, and using ideas from economics to teach tolerance and compassion and intellectual rigor. It’s about using economics to understand the family, and using the structure of the family to illuminate issues in economics.

Every now and then, an insightful college student challenges a professor and turns out to be right. To a conscientious professor, that’s the most joyful experience you can have in a classroom. Parents—at least the kind of parents who encourage the lively exchange of ideas among family members—have ample opportunity to feel the same kind of joy. So do opinionated authors, if their readers are attentive. The arguments in this book are the product of sustained and careful thought, and they seem to me to be right. But when they’re wrong, I hope that in the spirit of the classroom and the family dinner table, you’ll let me know.

2

The Lessons of the Playground

I AM BLESSED WITH A CHILD SO PRECOcious that at age five, when she was watching television and heard newly elected President Bill Clinton announce his intention to increase the income tax, she immediately burst into tears. There never was a prouder father.

The tax package came wrapped in the usual rhetoric: The rich have too much and the poor have too little; They have more than they deserve, It’s only fair, and so forth, ad tedium.

From the fact that politicians supply such rhetoric, I infer that there are voters who demand it. Probably that’s because it helps them feel less guilty about living by the sweat of their neighbors’ brows. Better to pretend your neighbor deserves to be exploited than to admit you’re just being acquisitive.

The key word here, though, is pretend. The fact of the matter is that nobody really believes the rhetoric of redistribution. You can use that rhetoric to fool some of the people some of the time, and they might appreciate being fooled. But nobody believes it all of the time, and deep down nobody believes it even some of the time. Nobody even comes close to believing it deep down.

How do I know this? I know it because I have a daughter, and I take my daughter to the playground, and I listen to what the other parents tell their children. In my considerable experience, I have never, ever, heard a parent say to a child that it’s okay to forcibly take toys away from other children who have more toys than you do. Nor have I ever heard a parent tell a child that if one kid has more toys than the others, then it’s okay for those others to form a government and vote to take those toys away.

We do, of course, encourage sharing, and we try to make our children feel ashamed when they are very selfish. But at the same time, we tell them that if another child is being selfish, you must cope with that in some way short of forcible expropriation. You can cajole, you can bargain, you can ostracize, but